China powers new US dollar bond market as it heads to US$1 trillion

Tokyo

IT is a lot harder for David Yim to rack up the airline miles these days. The bond underwriter at Standard Chartered plc used to fly across the Pacific from Hong Kong to the US four or five times a year to arrange US dollar debt deals, but he is not sure that he will make it even once in 2017.

Such is the gravitational pull that China is having on the market for US dollar bonds issued by Asian companies and banks. Borrowers used to tap US-based investors when they sold US dollar securities. Now, there is a big enough pool of greenbacks in Asia and predominantly Chinese buyers are able to take up the vast majority of bonds sold in US dollars.

Within three years, this market may reach US$1 trillion, composed mostly of Chinese US dollar bonds, according to projections from Australia & New Zealand Banking Group Ltd. Big Chinese demand may be changing the risk dynamics of the US dollar bon…